The client perspective should be ignored at your peril
Have the structural changes in the fiduciary industry resulted in clients coming last? Have the mechanisms and processes introduced industry-wide to protect our clients resulted in them bearing the brunt of the increased cost of business to adhere to such rules? Is that cost worthwhile?
The industry has undergone significant transformation in the last decade and what was a simple choice for clients when selecting a trustee has changed. With the introduction of private equity, trust businesses listing (or about to be list), the retraction of services by bank-owned trust businesses, the provision of legal advice or investment services by trustees, the choice is wide.
Businesses are constantly being traded, creating uncertainty for the staff and their client families. Many geographies and the clients associated with them are perceived to be higher risk and are consequently being exited by organisations concerned by their brand image and their inability to properly manage structures which are perceived to have greater fiduciary risk.
Selection of a trustee for the long term is a real dilemma for clients and their advisers.
Keeping up with change
The environment is alive with legislative and regulatory change. Public and political demand for transparency has never been higher. Whether one agrees with this change or not, the reality is that it will not lessen. In order to survive, businesses must embrace this change and equip their teams and systems with sufficient scale to properly implement it.
Gone are the days when a trust business can have multiple offices that are staffed with only a handful of employees. A comprehensive legal, compliance and risk team is a necessity in every business.
It's a professional fiduciary’s responsibility to preserve and enhance a trust fund and this includes remaining at the forefront of such change. It is imperative to ensure each entity managed and the associated parties are fully compliant in all relevant jurisdictions. Failing to do this may result in additional taxes, penalties or even prosecution.
Such investment comes at a cost and unfortunately not all clients see the added value in such expenditure. This means when they are charged the commensurate share of the cost, the knee-jerk reaction is apparent. Thankfully, as time passes, there is a greater acceptance by clients, especially as the industry adjusts and the cost becomes the norm.
It's also telling that the more informed a client is, the more they will seek comfort that infrastructure of this nature is already in place. This extends to areas such a firm’s cyber security and data protection. Given the level of information supplied under beneficial ownership registers, CRS and FATCA, clients quite rightfully want to know that the sharing of data will not extend beyond what is required under law and the security in place will defend attack from unsavoury sources.
Longevity of relationships is key to any client that is implementing a long-term estate and succession plan. Having a team of people focussed on them and their family ensures that the knowledge and history relating to a client relationship is retained and recognised across the generations. This stability helps to protect the business as risks are identified, mitigated and managed on an ongoing basis.
This requires a stable team where the key relationship owners are retained in the business for the longer term. It is only able to achieve this if the working environment is such that they remain loyal to, and subscribe to, the culture and values of the business. Collaboration and an information flow within the team binds teams together.
Implementing these practices fosters an ongoing, healthy and informed drive within the team to always pursue the best delivery of value-added services to that client relationship.
The relationship teams should be assigned a case load that is manageable given the increased complexity of modern trust administration. This creates an interesting dynamic in the business as to in order to facilitate investment in a client relationship, capacity is required. This can only be done if the team isn't overloaded with clients.
By implication, a business has to either build an army of administrators to handle a large portfolio of clients or be more selective and choose to be a boutique with a fewer number of clients. The alternative option is to commoditise what should be a bespoke offering so that the client’s geographic location, asset type and activities are limited.
Many modern families are widely spread geographically and their assets and interests are similarly diverse and international. Trying to shoehorn clients into this type of business model isn't putting the client at the centre of a relationship and a more bespoke a selective approach is clearly required. When taking into account the complexity of tax legislation, reporting requirements and family dynamics the job can’t be competently done without such a focus. Whilst systems certainly do create efficiencies, the human interaction can’t be ignored as for complex structures this is mandatory and expected by the client.
Trustees need to recognise why they are in business. Too often a drive for profit for shareholders can end up overtaking the basic rationale for a fiduciary business: servicing the interests of it clients in a professional, dynamic and personalised way. It’s only natural that a client who feels understood and important will entrust their values and wealth to an organisation which in turn will yield a sustainable return for the shareholders.
Published by Business Life